Head of Business Analysis Deep expertise in different fields and industries, such as sales, commerce, supply, accounting, finance, and banking. This experience allows me to make a 360-degree business analysis, find insights, generate clever business solutions.

4 Important Points to Pay Attention to in Case of Blockchain Adoption into Business

5 min read

Introduction

What are the words that you hear the most when it comes to blockchain? Security, decentralization, trust, smart contracts, cryptocurrencies. They drive the blockchain adoption into businesses, rushing the business owners to utilize new possibilities. However, the devil’s always in details, and that’s what I want to emphasize in this article – the details which may negate all your efforts and resources to receive value while adopting blockchain to your business model.

If you want to utilize the blockchain just to place a mark on your project – “I have blockchain, my project is secure” – don’t waste time and skip this post. However, if you want to be sure that the blockchain in your project will create value for you or your customers – you are welcome to pay attention to the points below.

Security

Let’s start with security, as far as it is one of the most valuable points for mass-market applications. What does security usually include? It is:

  1. Hashing sensitive data, like passwords
  2. Data immutability, meaning that historical data cannot be edited or deleted
  3. Data distribution/replication, meaning that the copy of any data is replicated to the whole network

Value of some of the points above is obvious, the value of others is not. However, let’s consider the alternatives:

  1. Can hashing be implemented not via blockchain? Yes, of course.
  2. Can data immutability be implemented not via blockchain? Yes, of course.
  3. Can data distribution/replication be implemented not via blockchain? Yes, of course.

What does that mean? That means that blockchain is not an ultimate tool to resolve these problems.

First of all, blockchain becomes really valuable in terms of security when all these points are implemented altogether. Second, even if all these points will be implemented, it does not mean that your blockchain is valuable. It is also important how the blockchain is implemented. Here is an example of a secure and valuable system (kind of Ethereum network):

It is secure and valuable because:

  1. Copy of any data is stored on each node
  2. All the nodes take part in transaction validation
  3. All the nodes synchronize between each other

Here is an example of a not so secure and valuable system:

  1. Copy of any data is stored on each node
  2. One node makes the decision to validate or not validate the transaction
  3. All the nodes synchronize between each other

Both of the systems can be called decentralized because the data is stored on all the nodes in the system. However, the second system has a potential security bottleneck which negates the pros of the decentralization – if you hack the MasterNode, you may gain control over the validation of the transactions. So, it really depends on the way you define “decentralization”, and how deeply you dive into the system you want to build.

Decentralization and trust

In the points above I provided an example of two different systems in the context of security. Now, I will consider them in the context of decentralization.

The key here is the definition of the term. Here are some points which may be taken into consideration:

  1. Do all the nodes store all the information?
  2. Do all the nodes participate in the verification process?
  3. Do all the nodes have the same permissions for the blockchain information?

Here is an example of a private blockchain network:

The network can be considered decentralized because the copy of the data is stored on most of the network machines. At the same time, the network can be considered centralized, because there is a single point of authority/trust, which validates the operations between the participants. We shouldn’t say it is a problem. It is a structure that should be applied for specific cases, like any other tool.

Smart contracts

From time to time, I meet customers who consider smart contracts a solution to every problem. Automation? Smart contracts! Trust? Smart contracts! Decentralization? Just more smart contracts! Beware of such an attitude, it can lead you not to the results you wanted.

Let’s consider the following case:

Each of the blockchain nodes in the system, displayed above, has a copy of some code, called “Code XXX”. One of the nodes has a piece of code, called “Code YYY”. In this situation, the “Code XXX” may be considered as a smart contract, as far as it is copied to other participants of the blockchain. The “Code YYY” may not – it is stored only on one of the nodes and it is used only there. As soon as the code is shared to other nodes and can be used by them – the “Code YYY” can be considered as a smart contract.

Stored and used on one node
Shared
Considered as a smart contract?
Yes Yes (tick)
Yes No (error)

Of course, the smart contract concept is much wider, but for the article, we can keep it as simple as that.

Cryptocurrencies

If you want to create an application to perform operations with cryptocurrencies, you are not always obliged to include blockchain development into it, be careful about anyone who says you the opposite. If you want to provide your customers with a possibility to sell cryptocurrency or to buy it, this feature may be implemented without blockchain. In the examples below I will try to clarify how it can work.

Example 1: your customer buys cryptocurrency on your website
  1. The customer specifies his bank card details, cryptocurrency wallet details, and confirms the operation
  2. You receive the money to your bank account

Your cryptocurrency partner sends cryptocurrency to the customer’s wallet

The only thing you must be sure about in the example above is that you receive and send fiat money properly. It can be implemented via integration with the most popular fiat gateways, like Stripe and others. You are not related to blockchain in any way, it is the responsibility of your cryptocurrency partner. Thus, you do not need any blockchain development.

Example 2: your customer pays for a service with cryptocurrency
  1. You customer chooses cryptocurrency as a payment method and sends cryptocurrency
  2. Your cryptocurrency partner receives cryptocurrency
  3. Your partner sends fiat to you

In this example, it is important to correctly integrate your cryptocurrency partner with your website. Your customers may be able to pay for the goods or services with a special modal window, or with your crypto-partner website. Anyway, regardless of a particular implementation method, your website still has no deal with the blockchain.

So, in what cases you do need blockchain for cryptocurrency payments? In my personal opinion, here are some of them:

  1. You want to be a part of the blockchain network (utilize a node)
  2. You don’t want to use any 3rd party services
  3. You want to provide your users with a possibility to manage their cryptocurrency balances and operations directly, without any 3rd party/middleman
  4. Other cases when you want to perform operations directly in the blockchain and utilize the blockchain’s full capacity

What to do next?

The goal of this article is to share some of our experience with you in the most simple way so that you could make more wise decisions and increase the efficiency of blockchain adoption into your business. For some of our readers it can be too simple, for others it can look too complicated. Because of that, I would like to give you some kind of a check-list which, I think, can increase the efficiency of your cooperation with the blockchain software development team.

Here it is:

  1. Specify business requirements, not technical requirements.
  2. Delegate the technical decisions to the developers and do not interfere, just validate the arguments on which their decisions are made.
  3. Find a technically-profound person to review the developers’ decisions.

Here are some examples:

#
Do (tick)
Don’t do (error)
1 Specify the task this way: “I want to provide my customers with the possibility to pay for goods with the most famous cryptocurrencies on my website” Specify the task this way: “Integrate ERC-20 standard into my website payments”
2 Speak this way: “Why do we have Master Nodes? I didn’t see them in Ethereum architecture, and I thought that we planned to do something like that. How can we delete them from the architecture? What will it lead to? Speak this way: “I’ve seen an Ethereum architecture, there are no Master Nodes. Delete the master nodes from the architecture, but keep the same functionality.”
3 Delegate the review of technical decisions to a special person loyal to you Review all the technical decisions yourself and approve/decline them yourself, even if you don’t have any expertise

Thank you for the attention and I wish you success in your blockchain adoption.

Oleg Genaliuk
Oleg Genaliuk Head of Business Analysis Deep expertise in different fields and industries, such as sales, commerce, supply, accounting, finance, and banking. This experience allows me to make a 360-degree business analysis, find insights, generate clever business solutions.

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